March 16, 2008
Techniques Used to Find Unreported Income and Hidden AssetsFinding unreported income and hidden assets is not a matter of guesswork. While success is never guaranteed, the use of certain techniques may produce successful results. Here are a few tips to consider:1. Look at the lifestylesOne of the first steps is to look at the lifestyle of the person earning the income and match it with the income being reported. What kind of car does he/she drive and how was it paid for’.) What kind of clothes are being purchased, where does he travel and what hotels does he stay at? If there is a disparity between the lifestyle and the reported income, then one must look at the person’s debt to see if the lifestyle is paid for by borrowed money. If the debt has not increased, one must look for other possible explanations, such as a recent inheritance. If nothing seems to justify the lifestyle in excess of the reported income, then there is a good possibility that unreported income is funding the lifestyle. This hypothesis, with its justifications, may not, by itself, be convincing to the court, but it will lend significant support to other evidence.2. Look at the expensesCertain expenses are indicative of the nature of the business and often they can be verified. In the above example of the restaurant, that business sold a huge amount of beer. Since there are only a small number of beer distributors and their records are computerized, it is relatively easy in such a situation to determine the volume of beer being purchased. The same technique was used in a case involving unreported pastrami sales. The key to the case was determining the amount of raw beef navels purchased. Once one knows the amount of goods purchased for sale or manufacture, the actual sales can be determined fairly accurately after one determines the usual markup.Similarly, certain manufacturing processes may require certain usage of utilities. A product that has water as a main ingredient will have production in direct relationship to the amount of water being used by the factory. A review of the company’s utility bills may demonstrate whether production is going up or down. If the business records show that sales are down, production is down, but water usage is up, then someone will have to explain the disparity.3. Look at the cash flowHow does the money come in and who receives it’? If a certain person opens the mail, records what payments came in, and then delivers the checks to a second person, who actually makes the deposits, then there is good internal control over the funds. In that situation, it is probable that all receipts are being recorded. In smaller businesses, such as in professional practices, it is possible for the same person to open the mail and to make the deposits, and it is not unusual for the owner himself to get the mail once in a while. Furthermore, payments are often made out to an individual instead of the formal business name. Particularly with a professional practice, the name of the person is often the name of the business, or a client may issue payment in the name of the partner who provided the services. In situations where the owner might open the mail and where checks could be payable to the owner, one should review the accounts receivable records with the cash receipts records. All write-offs of significant amounts should be reviewed to see if the write-offs are merely cover-ups, for receipts that were simply deposited into a personal bank account instead of the business account. The writeoffs should be supported by documents indicating attempts to collect, such as correspondence, letters from the company’s attorney, lawsuits, etc.4. Look at the business operationsA visit to the business premises is very helpful. and sometimes it helps rule out certain areas which might otherwise be explored. For example, a business with gas stations has less of a probability of unreported income than a supermarket. A visit to the gas stations will show that all sales, in dollars. is reported by each gas pump. If the owner does not work at the gas station, he would not want the pump to malfunction, because that is his only way to determine that his employees are not stealing from him. Therefore, the pump equipment itself is very useful in determining the actual sales. In a supermarket, an owner could simply arrange that certain cash receipts are simply not deposited. It is essential to understand how the business is run, how often the owner comes to the business. what is his relationship with his employees, etc.5. Look at the industryThere are statistics available for many businesses, and the statistics of the subject business should be compared with others similar to it. In particular, the gross profit margins should be compared, and the overall profitability should be compared. If in the industry, it costs fifty cents for each dollar of sales, and in the subject business, it costs sixty five cents for every dollar of sales, then one should examine the expenses to see if they are inflated by personal or unusual expenses. It may be that there is a logical explanation for the variance of the subject business from the industry norm, but the variance itself is an indication that something is unusual, and deserving of special analysis.SummaryIn summary, while it is often very difficult to find unreported income and hidden assets, sometimes clues are left that are very meaningful to a trained eye. The problem then becomes a matter of proving the allegation, rather than determining it.
March 7, 2008
Fraud is defined as a type of illegal act in which the perpetrator obtains something of value through willful misrepresentation. Fraud usually occurs within the context of legitimate business transactions and is carried out in such a manner that legitimate business unwittingly conceals it. Specific indicators of fraud are generally difficult to identify; however, generic indicators or “red flags” (warning signals) are almost always present, and auditors must rely on understanding of how fraud is committed to successfully recognize these indicators. Both transactions that may be fraudulent and circumstances that may appear legitimate must be viewed through a lens of auditor skepticism.
The potential for committing fraud is greater when one or more of the following three elements exist: perceived need, opportunity, and rationalization. The motivation for most fraud is financial in nature and is fueled by the perceived needs or desires of the individual committing the fraud. The opportunity to commit fraud must exist, and weak internal controls provide such an environment. Individuals responsible for fraud rationalize their fraud: “The government is so big that what I take will never be missed.” or “They owe me.” Therefore, when conducting audits, the auditor should be on the watch for these elements as he/she looks for indicators of fraud based on a set of signs, signals, and patterns, which may be encountered during the audit.
Examples of these signs, signals, and patterns include the following:
Weak management. Failure to enforce existing controls, inadequate oversight of the control process, and failures to act on fraud are signs of weak management.
Loose internal controls. Inadequate separation of duties involving cash management, inventory, purchasing/contracting, and payment systems allow the perpetrator to commit fraud.
History of impropriety. Past audits and investigations with findings of questionable or criminal activity are very useful as roadmaps of where to look for current activity.
Unethical leadership. Executives who do not follow the rules and focus on personal achievement and not organization goals may be involved in fraudulent activity.
Promise of gain with little likelihood of being caught. When a perpetrator works in an environment of weak management, loose internal controls, and high-volume transactions, he/she has ample opportunity to exploit the situation for personal benefit.
Unexplained decisions and/or transactions. Transactions that are out of the ordinary and are not satisfactorily explained, for example, unexplained adjustments in inventory and accounts receivables, are often signs of fraudulent activity.
Failure to follow legal or technical advice. Unexplained deviation from legal and/or technical advice, particularly when concurrence is required, may be evidence of fraud.
Missing or altered documents. Sometimes the perpetrator includes misinformation and false data entries in records that are obvious; however, the perpetrator makes no attempt to conceal the changes. Indicators include providing information late without explanation, concealing unfavorable information, never creating required documentation, creating documentation after the fact, and destroying documents.
To understand and identify information that may suggest fraud, the auditor should be aware that fraud is most likely to fall within six categories of criminal violations: theft, embezzlement, fictitious transactions, kickbacks, bribery and extortion, and conflict of interest. In any of these, fraud may occur.
Theft involves property, facilities, services, and time.
Embezzlement involves money, positions of trust, and a trusted employee. The funds embezzled can be from receipts or disbursements or from fictitious transactions involving funds over which the embezzler has custody and control. Embezzlement generally results from a breakdown of internal controls, i.e., no separation of duties.
Fictitious transactions usually involve a single party. False records or transactions are perhaps the most sophisticated of schemes.
Kickbacks may be offered by a vendor or solicited by a contractor or government buyer Moneys are paid from government funds. Inflated invoices and subsequent payments generate kickback proceeds and are used to secure government or contractor business or steer business to a particular contractor.
Bribery and extortion occur when an offer is made and accepted in return for abuse of position; i.e. a government official accepts something of value in return for sensitive information or in return for a favorable decision. A government official demands money in return for a favorable and expedited decision.
February 19, 2008
February 4, 2008
When an individual or a company wishes to avoid being exposed to the possibility of paying out money for judgments resulting from a lawsuit or in personal matters such as alimony or child support, it is not uncommon for substantial assets to be hidden in a variety of ways.
Any type of asset can be hidden, including real property, jewelry, stocks, bonds, vehicles, pleasure craft and the most liquid of all assets – money. When an asset is moved or transferred with the intention to defraud, hinder or delay discovery by anyone classified as a creditor, it is then considered to be a hidden asset. This includes hiding of funds from family members attempting to collect on such payments as child support or alimony.
The most difficult of all hidden assets to reach are those that are placed outside of the country in what are called offshore accounts. Certain countries such as the Bahamas, Cayman Islands and Switzerland are known for their discretionary banking laws in which secrecy rules. And these countries do not recognize claims made against assets through courts in other nations. Thus assets hidden in offshore accounts are essentially to be forgotten about by those seeking to enforce judgments, or collect on debts or child support.
WHAT KINDS OF ASSETS ARE HIDDEN
Most hidden assets are of the liquid variety – bank accounts, stocks, bonds and mutual funds. In most instances liquid assets are transferred into the name of a spouse, other relative, friend or business entity. In the most extreme cases, the funds are transferred into accounts in offshore banks where they cannot be touched under the laws of the United States.
Liquid assets can also be hidden by placing them into safety deposit boxes in the names of relatives or friends or an alias. Another method for hiding cash is to convert it into traveler’s checks, savings bonds or stockbroker accounts. Still another method of ridding oneself of cash, but still retaining the value, is to use the liquid asset to pay down a mortgage, overpaying the Internal Revenue Service or pay down credit card balances.
Sometimes a liquid asset is converted into personal property such as works of art, collectibles or antiques. Unless those items are hidden, they can be attached as part of an award in a court ordered judgment, but collection of the property can be difficult to accomplish.
Real property, vehicles, boats, planes and other so-called “personal toys” can also be hidden for the same reasons as liquid assets. When facing a lawsuit, which could lead to a judgment, many people attempt to hide these forms of property by transferring ownership and title to the property to another person or entity.
HOW ASSETS ARE HIDDEN
In this section, the various methods for hiding assets are detailed. But it is important to remember that when starting any asset search, the obvious should not be overlooked. A basic background check will help to uncover the use of an alias or the use of multiple social security numbers. In addition, the names of relatives and business associates are often revealed through an initial, but thorough background search.
Hiding Assets Under Someone Else’s Name – This is the most commonly used ploy for creating the illusion that assets are not in one’s possession. When a transaction takes place between a subject and spouse or in-laws and the date is close to the date of a loan default or bankruptcy, a red flag of suspicion is raised quite easily. However, proving fraudulent intent is still difficult, especially when attempting to obtain a court order to seize property that is no longer in the name of the subject.
Placing property in the name of a spouse or other family members can often have a negative impact upon one’s financial security.
Trust Funds – The most sophisticated asset-hiding method is to transfer property into living trusts or offshore trust accounts. Many of these type transfers are legitimate; thus it is important to look at such trusts in relationship to the individual’s overall asset/debt ratio. When transfers to these type trusts are made to deliberately avoid payment of debtors or litigants, they are referred to as “preferential” or “fraudulent” transfers. If it can be shown that such transfers were made in anticipation of or during litigation or bankruptcy, they can be reversed under the laws of most states.
People of substantial means who are exposed to litigation or the demands of creditors may attempt to shelter large sums by making generous gifts to a trust such as the Multi-Generation Trust. In such cases, the MGT grantors then assign spouses and children as beneficiaries.
Real Estate Trusts – Most real estate trusts are established for legitimate reasons. But there are those individuals who will use these trusts to hide real estate as a means of concealment. In such trusts, it is not uncommon for the person hiding the assets to serve as trustee or to have family members serve in this position.
One tactic used that makes tracing the property to an individual quite difficult is having a spouse, child or friend serving as trustee buy and obtain a mortgage for the property through the real estate trust. In this manner there is no way a records search will be able to trace the property back to the individual in question. However, this type of relationship relies upon the faith in family or friends to funnel the funds back to the individual at the proper time.
In some states, real estate trusts do provide a safe haven for the hiding of assets. One may hold 100 percent of the assets in a trust, but not serve as trustee. Therefore there is no way in which the trustee’s name will be cross-referenced to the name of the individual min question. But this only holds true in some states, since the majority require that the names of any individuals holding beneficial interests in the trust be revealed.
In many states, real estate trusts are a poor medium for the hiding of property. Records of deeds, mortgages, declarations of trust and other such documents are maintained in municipal and country recorder’s offices. In half of the local jurisdictions these records are cross-referenced between the name of the trust and those individuals serving as trustees. Thus the paper trail is easy to follow and the hiding of the asset can be exposed.
Hiding Under a Corporate Umbrella – Corporations and limited partnerships offer essentially the same opportunities for concealing real estate assets as do real estate trusts. But, as with trusts, many states require that deeds cross-reference information to partner’s names when they are signatory to real estate documents.
Often corporations will list a statutory agent, and this is generally an attorney who has no actual connection with the owners of the corporation.
In most states a corporation is required to file an annual report with the commission that regulates corporate activities. Any information one is able to acquire from corporate records that are available may be useful and give some clues as to hidden real property or assets.
It may be fruitful to correspond with business partners or corporate associates to glean further information regarding the subject in question and that individual’s business dealings.
Hiding Assets in Exempt Plans – There are various plans such as pension, profit sharing, 401 (k)’s and Keogh plans that are exempt from creditor’s claims. Often people who know they are at risk from litigation will invest some of their assets in these plans, which cannot be touched.
Hiding Assets as Gifts – When assets are given to relatives or friends as gifts, they can be exempt from creditors or court judgments. But the inherent risk is in having relatives or friends later refuse to return the assets. This method for hiding assets is totally fraudulent; thus if the subject in question ultimately looses the asset, one cannot feel sorry for their loss.
There are many important legal tools that can be utilized to retrieve assets once they have been identified. This section details the important lawful procedures available.
Writ of Execution – This is a common judicial order that directs the enforcement of a judgment. The writ instructs the sheriff or constable to seize the debtor’s non-exempt property for sale at auction after which the proceeds are directed to the creditor.
Turnover Order – This orders a debtor to turn all non-exempt property over to the judgment holder. This remedy permits the holder of a judgment to cast a wide net to draw in all available assets when the debtor’s property cannot easily be attached or seized by the ordinary legal process. This remedy is generally applied when there is no other means that can satisfy the judgment. It is not necessary for the holder of a judgment to first exercise all other remedies before seeking such an order.
Bank Levy – An order that enables the creditor to attach the debtor’s bank account.
Blanket Levy – This procedure involves the serving of a Writ of Execution and a Bank Levy on every bank in the debtor’s home area. This procedure assumes that the debtor’s bank of record is located within a few miles of home or work, which is usually the case.
Debtor’s Examination – This is a legal proceeding during which the creditor can demand that a debtor detail where his or her bank account is located. Unfortunately, the debtor has time to withdraw funds from the account prior to the examination. But an examination of the bank’s records may reveal information on a possible transfer of funds to another account or bank.
February 4, 2008
WHY CONDUCT AN ASSETS SEARCH?
There are clearly situations of a business or personal nature in which it is essential to check for the possibility of hidden assets. Knowledge of such assets can make a big difference in the establishment of grounds for particular types of interpersonal actions or the furthering of certain business relationships. And of course the law enforcement community needs to monitor underworld activities, a part of which is watching for laundered or hidden assets, especially those that might end up being removed to offshore accounts. Thus, an asset search is vital to full disclosure of resources in a variety of matters both civil and criminal. The primary reasons for an asset search in the private or family sector are evaluated below:
Entering into a New Business Venture – If one is considering investing in a new business, bringing a new investor into an existing company or contemplating a merger between companies, it is essential to conduct a thorough background check on the individual or corporation. Such a check also includes a comprehensive assets search.
Prior to Entering into a Lawsuit – It is important to conduct an assets search prior to filing suit against an individual or company to determine what assets or regular income is present in the event a judgment is ordered by the court (see below). It is not worth the cost of legal fees to file a suit against a person or company that will be unable to pay any court-ordered sum. It is also important to determine what assets or property could be attached on an uncontested basis once a judgment is issued, assuming victory in the suit. If the entity to be sued has nothing of value that can be taken, there is no point in entering into a suit.
Collecting on a Judgment – When the court order a sum of money to be paid as part of a civil action, a judgment is issued, this is simply a court order for the payment of funds. It is rare for the defendant to simply pay the amount ordered on the spot. The judicial system only orders payment, but collection is the responsibility of the plaintiff. A judgment will stand for ten years, but can be extended to become permanent. However, this requires that the defendant, who is now considered to be the debtor, be questioned in a deposition or hearing under oath regarding their financial status. If the debtor is going to surrender an item of property such as an automobile or boat, be certain to do an asset search before taking possession. If there are any liens against the property, taking possession may also bring with it liability for the lien.
Divorce – The finances involved in a divorce can often become rather complicated. It is not uncommon for a spouse to hide assets that would be open to dispute. An asset search of the party being divorced is very important to be certain that all assets are accounted for.
Child Support/Alimony – Public child support enforcement agencies are ill- equipped to locate parents who evade their child support obligations. Quite often the errant parent will attempt to hide assets, thus pleading an inability to meet child support or alimony payments. In child support cases, once the parent is located, information regarding their wages or any hidden assets should be given to the proper child support enforcement agency that can then facilitate collection.
Contestation of a Will – Quite often personal assets may be hidden and not disclosed in a will. Potential beneficiaries or those entitled to a claim against the estate should search for the possibility of hidden assets.
WHAT ARE ASSETS?
Everything that is owned is potentially an asset. Stocks, bonds, real estate, money in the bank, automobiles, RV’s, boats, airplanes and even household furnishings are all considered assets. Personal assets are classified as either being personal property or real property.
Tangible Personal Property – This includes vehicles, equipment, inventory, telephone systems, computers, bank accounts, stocks, bonds and paid insurance policies with cash value. Any items of value that a person or a company buys or comes into possession of constitute a tangible asset. Ownership is determined by possession unless the property must be licensed such as vehicles, boats or airplanes. For those types of property, the ownership is determined by title and registration. For all other property, a sales receipt or cancelled check can be used to determine ownership, but the courts have been guided by the belief that possession is nine tenths of the law.
Intangible Personal Property – This category includes patents, royalty agreements, promissory notes, contracts, accounts receivable, wages or other income.
Real Property – All homes, condominiums, apartment or commercial buildings and land are classed as real property. Only a residence that is protected by a homestead exemption is exempt from being attached. All other real estate is subject to claim through the courts.
HOW TO INITIATE AN ASSETS SEARCH
The Initial Phase of Investigation – Before attempting to locate assets through public records, it is essential to have the subject’s correct name and address. In some local record’s searches, the name alone will suffice without the need for an address. Initially it is important to determine that the person is who and what he or she claims to be.
It is vital to find out not only where the individual lives, but also their place of employment, if dealing with an individual. It is also worthwhile to obtain the names of close relatives because often people trying to hide assets will place them in the name of a family member. Paper trails will exist if any significant property was transferred, and here is where a deed transfer can be traced through country records.
Under federal law, each person is entitled to one social security number. A SSN is but one of several “identifiers” which connect a person when establishing a positive identification. The others are, DOB, and addresses.
Creditors, investors and government entities have the greatest capability in locating assets, especially in cases where an individual or corporation owes monies that are not being repaid. The most adept creditor is the Internal Revenue Service. Their auditors and field agents are experts in locating assets to satisfy levies, liens, tax fraud and evasion matters. The Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Small Business Administration, student loan authorities, bankruptcy trustees and state departments of revenue are also expert in locating hidden assets. Professional skip-tracers and any individual who takes the time to conduct the searches necessary to locate the assets of both persons and companies can employ many of the same methods that the government uses. Listed below are the important sources for such information:
National Death Index – The Social Security Administration’s Death Index should always be checked to see if, when and where a subject may have died. If an estate was filed, the most likely location is the state or country where death occurred. Any county courthouse database contains copies of wills entered into probate.
Income/Wages – A major asset that can be attached or garnished is a person’s wages. In collecting on a judgment, child support payments or divorce, it is important to know what property a potential defendant owns and what income or wages are earned. The power of the court can order payment on a judgment, child support or alimony, but it does not use its authority to actually collect as per its orders.
Finding a Defendant’s Place of Employment – Professional skip-tracers often conduct surveillance on a subject by discretely following the person to his or her place of employment. Discretion is the key to conducting such an undercover operation. If the subject is aware of the make or color of a vehicle being driven by the one conducting the operation, it could prove to be a wasted effort. A rental vehicle or one driven by a friend or associate can negate this problem.
To actually verify employment, a call or visit to the employer under any number of pretexts can glean information regarding the person’s salary or pay date. “He is buying a car from me and I want to verify his employment and the amount of money he makes,” is one simple ploy. And if receiving an answer, then ask, “Does he or she get paid weekly or biweekly?” To obtain more in depth information, one can feign being a future employer. Then it may be possible to ask such questions as, “Is he or she in line for a promotion or a bonus?” or “How long has he or she been on the job?” Employers are often quite candid when they think they are talking to a peer.
Unearned Income – This is an important source of revenue and includes money that comes from rental property, dividends or interest on stocks or bonds. This information may be more difficult to obtain, but it is income that should be reported on federal and state tax returns.
Subpoena of Business Records – If it becomes necessary to use the courts to obtain information, a subpoena of the subject’s employment records by means of a Business Records Subpoena will reveal payroll checks that have been cashed. On the endorsement side it is often possible to find the name of the individual’s bank and the account number unless the checks were cashed for currency.
CHECKING PUBLIC RECORDS
Public records available in city halls, county courthouses and at state repositories contain valuable information that is essentially public information available to all who inquire. However, one needs to know how to obtain the types of documents that will reveal asset holdings. And herein lies the challenge.
Local Level Searches – Always start a search at the city or county level where most documents regarding real property, corporate data, UCC filings, divorce and community property proceedings as well as probate and motor vehicle information are to be found. Within these records may be found descriptions of real property and the make, model and license numbers of vehicles.
Search Jurisdictions – There are over 4,300 jurisdictions in the United States that store records that can be useful to those seeking to locate assets. Most of these jurisdictions are at the municipal and county level, and each sets its own rules governing public access. These are the records that prove to be the initial basis for any asset search. The following list of jurisdictions also provides the types of information available:
County Assessors Office – Real property valuation records
County Records Office – Property records and deeds
County Court Records – Bankruptcy, liens, judgments, business licensing
Secretary of State’s Office – Corporation records, UCC filings
State Motor Vehicle Division – Motor vehicle information
State Vital Statistics Office – Vital statistics, probate records, divorce proceedings records
Consult Information to familiarize yourself with various resources and what’s available in local, county, state and national records. Consult these records yourself by referring to Court Records, State Records and National Records in the Directory section.
Search Parameters – There are basic details that one needs to be aware of when conducting records searches. This section describes the types of information available by category of property.
Real Property – The best documented of all assets is real property. Records are kept at the county level at either the County Recorder’s Office or an office devoted to handling the registration of deeds. Real property records are indexed by the name of the property owner, but generally cross-indexed by the property address. The records include property jurisdictions, location, deeds of trust, liens, and information regarding recent transactions such as mortgage lender, title company and attorneys involved in such transactions.
When checking on a piece of property, it is important to look for quit claim deeds, as these are often filed when a piece of property is transferred to a family member or friend to be hidden. In such a search, it is helpful to know the wife’s maiden name, as often property is transferred to in-laws as a means of hiding an important real estate asset.
The market value of real property is not easily determined from tax assessments or mortgage balances. Consultation with a real estate broker will help to determine the actual value of a piece of property in question.
Motor Vehicles – The Department of Motor Vehicles will provide information regarding ownership, normally charging a fee for this data. Vehicles are registered either under the individual’s name or, in some states, that of a company. Once again, it is important to check under the names of family members to whom a motor vehicle could have been initially listed or later transferred if there has been an attempt to hide valuable property. Motor vehicle titles will also show if there is any lien holder on the vehicle.
Boats – In each state, the natural resources department will have information regarding boats or other water-operated vessels that are owned by individuals or companies. Once again it is important to check under the names of any parties to whom such property could have been transferred. Boats or other water vessels can be attached by court order providing that proper ownership can be established. The title information regarding boats is public record just as is motor vehicle information.
Aircraft – The registration of aircraft is made through the Federal Aviation Administration. This information is similar in nature to that of motor vehicles. It is therefore important to check under the name of the individual or company to determine ownership.
Corporate Property – Corporations, unlike individuals, have no property exemptions with regard to seizure for payment of debt. Information regarding the corporation’s operations and personnel is available from the Secretary of State’s office in all states. Some states will furnish information regarding directors, officers or principals of a corporation. Most of the information available is based upon what was filed by those who formed or presently manage the corporation. Many states do not require verification of the identification of those who apply to form a corporation. On average, more than 500,000 new corporations are founded each year in the United States.
THE IMPORTANCE OF UNIFORM COMMERCIAL CODE (UCC) FILINGS
The Uniform Commercial Code is a vital source when investigating business dealings. The law requires that a financial statement be filed whenever transactions take place that involve the use of personal property as collateral for a loan or lease. There is much valuable information in UCC filings that can serve as clues for the furthering of an investigation into assets.
There are over 8 million UCC filings completed each year. On average over 4 million parcels of real property will be transferred or are used for collateral. Likewise, millions of parcels of commercial real estate are traded or sold each year.
Always begin a search of UCC filings in the county where the subject in question resides. These records are indexed by the name of the debtor, and they also list the names of secured parties with regard to the debt. Each filing also requires an accurate description of collateral being used as security for the loan or lease. If a third party has guaranteed a loan or lease, the individual or business name will also be included in the filing.
Banks, leasing companies or individuals who have financially backed a business enterprise are excellent sources of information. They are often willing to divulge information when questioned. They may be capable of providing important details regarding other types of business arrangements or assets not specified in the UCC filings. In addition, they often can provide a picture of the individual or company pattern of doing business. They may even be able to provide names of stockholders, partners or family members who have provided financial backing. When a bank has provided a loan, there is a strong likelihood that the debtor also conducts his or her regular business or personal dealings at the same institution.
UCC filings remain active for a minimum of five years, but they can be extended. The filing in question may include a copy of a loan application from the secured party or a copy of the loan check made out to the debtor. An individual debtor generally deposits the loan check into the same account that is used for depositing payroll checks, spouse’s payroll check, stock dividend checks, rental income checks and other sources of personal revenue. If a debtor is attempting to hide any transactions, a common ploy is to close one account and transfer funds into a new account, and often the new account will be at the same bank. This provides a document trail that can be followed. To obtain a copy of a loan check or of the debtor’s bank records, a subpoena is necessary.
See: Conduct an Asset Search for more information regarding the array of important databases available.
LOCATING BANK ACCOUNTS
A bank account is highly liquid and is the easiest asset to attach. The most commonly asked question is, “Does the person who owes the money have an account at a particular bank?” Unfortunately there is no central database that maintains bank account numbers. Prior to 1999, locating bank account information was the most controversial area in a search for assets, but new banking regulations have brought about significant changes in data availability. Prior to the banking changes, a variety of techniques such as use of credit reports, information subpoenas and pretext calling were used to uncover bank account information. Under the new law, pretext calls no longer are permitted when attempting to obtain account information. Bank customers now have greater protection from searches. However, once a bank account has been located and verified with either social security or tax ID numbers, it can be attached in payment of court ordered judgments.
Many people with means have more than one bank account, insurance policy, brokerage account or safety deposit box. An individual tax return is a good source of information regarding any type of account that pays interest. A subpoena is required to retrieve tax returns.
February 4, 2008
Technological developments in this century have rendered the most private conversations of American citizens vulnerable to interception and monitoring by government agents. The electronic means by which the Government can extend its “antennae” are varied: microphones may be secretly planted in private locations or on mobile informants; so-called “spike mikes” may be inserted into the wall of an adjoining room; and parabolic microphones may be directed at speakers far away to register the sound waves they emit. Telephone conversations may be overheard without the necessity of attaching electronic devices to the telephone itself or to the lines connecting the telephone with the telephone company. An ordinary telephone may also be turned into an open microphone — a “miketel” capable of intercepting all conversations within hearing range even when the telephone is not in use.
Even more sophisticated technology permits the Government to intercept any telephone, telegram, or telex communication which is transmitted at least partially through the air, as most such communications now are. This type of interception is virtually undetectable and does not require the cooperation of private communications companies.
Techniques such as these have been used, and continue to be used, by intelligence agencies in their intelligence operations. Since the early part of this century the FBI has utilized wiretapping and “bugging” techniques in both criminal and intelligence investigations. In a single year alone (1945), the Bureau conducted 519 wiretaps and 186 microphone surveillances (excluding those conducted by means of microphones planted on informants). 1 Until 1972, the Bureau used wiretaps and bugs against both American citizens and foreigners within the United States — without judicial warrant — to collect foreign intelligence, intelligence and counterintelligence information, to monitor “subversive” and violent activity, and to determine the sources of leaks of classified information. The FBI still uses these techniques without a warrant in foreign intelligence and counterintelligence investigations.
The CIA and NSA have similarly used electronic surveillance techniques for intelligence purposes. The CIA’s Office of Security, for example, records a total of fifty-seven individuals who were targeted by telephone wiretaps or microphones within the United States between the years 1947 and 1968. 2 Of these, thirty were employees or former employees of the CIA or of another federal agency who were presumably targeted for security reasons; four were United States citizens unconnected with the CIA or any federal agency. 3 One of the primary responsibilities of the National Security Agency (NSA) is to collect foreign “communications intelligence.” To fulfill this responsibility, it has electronically intercepted an enormous number of international telephone, telegram, and telex communications since its inception in the early 1950’s. 4
Electronic surveillance techniques have understandably enabled these agencies to obtain valuable information relevant to their legitimate intelligence missions. Use of these techniques has provided the Government with vital intelligence, which would be difficult to acquire through other means, about the activities and intentions of foreign powers, and has provided important leads in counterespionage cases.
By their very nature, however, electronic surveillance techniques also provide the means by which the Government can collect vast amounts of information, unrelated to any legitimate governmental interest, about large numbers of American citizens. Because electronic monitoring is surreptitious, it allows Government agents to eavesdrop on the conversations of individuals in unguarded moments, when they believe they are speaking in confidence. Once in operation, electronic surveillance techniques record not merely conversations about criminal, treasonable, or espionage-related activities, but all conversations about the full range of human events. Neither the most mundane nor the most personal nor the most political expressions of the speakers are immune from interception. Nor are these techniques sufficiently precise to limit the conversations overheard to those of the intended subject of the surveillance: anyone who speaks in a bugged room and anyone who talks over a tapped telephone is also overheard and recorded.
The very intrusiveness of these techniques implies the need for strict controls on their use, and the Fourth Amendment protection against unreasonable searches and seizures demands no less. Without such controls, they may be directed against entirely innocent American citizens, and the Government may use the vast range of information exposed by electronic means for partisan political and other improper purposes. Yet in the past the controls on these techniques have not been effective; improper targets have been selected and politically useful information obtained through electronic surveillance has been provided to senior administration officials.
Until recent years, Congress and the Supreme Court set few limits on the use of electronic surveillance. When the Supreme, Court first considered the legal issues raised by wiretapping, it held that the warrantless use of this technique was not unconstitutional because the Fourth Amendment’s warrant requirement did not extend to the seizure of conversations. This decision, the 1928 case of Olmstead v. United States, 217 U.S. 438, arose in the context of a criminal prosecution, and it left agencies such as the Bureau of Prohibition and the Bureau of Investigation (the former name of the FBI) free to engage in the unrestricted use of wiretapping in both criminal and intelligence investigations.
Six years later, Congress imposed the first restrictions on wiretapping in the Federal Communications Act of 1934 5 which made it a crime for “any person” to intercept and divulge or publish the contents of wire and radio communications. The Supreme Court subsequently construed this section to apply to federal agents as well as ordinary citizens, and held that evidence obtained directly or indirectly from the interception of wire and radio communications was inadmissible in court. 6 But Congress acquiesced in the Justice Department’s interpretation that these cases did not prohibit wiretapping per se, only the divulgence of the contents of wire communications outside the federal establishment, 7 and government wiretapping for purposes other than prosecution continued.
The Supreme Court reversed its holding in the Olmstead case, in 1967, holding in Katz v. United States, 389 U.S. 347 (1967), that the Fourth Amendment’s warrant requirement did apply to electronic surveillances. But it expressly declined to extend this holding to cases “involving the national security.” 8 Congress followed suit the next year in the Omnibus Crime Control Act of 1968, 9 which established a warrant procedure for electronic surveillance in criminal cases but included a provision that neither it nor the Federal Communications Act of 1934 “shall limit the constitutional power of the President” 10 — a provision which has been relied upon by the Executive Branch as permitting “national security” electronic surveillances.
In 1972, the Supreme Court again addressed the issue of warrantless electronic surveillance. It held in United States v. United States District Court, 407 U.S. 297 (1972), that the constitutional power of the President did not extend to authorizing warrantless electronic surveillance in cases involving threats to the “domestic security.” The Court distinguished — but remained silent on — the question of warrantless electronic surveillance where there was a “significant connection with a foreign power, its agents or agencies.” 11
Without effective guidance by the Supreme Court or Congress, executive branch officials developed broad and ill-defined standards for the use of warrantless electronic surveillance. Vague terms such as “subversive activities,” “national interest,” “domestic security,” and “national security” were relied upon to electronically monitor many individuals who engaged in no criminal activity and who, by any objective standard, represented no genuine threat to the security of the United States.
The secrecy which has enshrouded the warrantless use of this technique moreover, facilitated the occasional violation of the generally meager procedural requirements for warrantless electronic surveillance. Since the early 1940’s, for example, Justice Department policy has required the approval of the Attorney General prior to the institution of wiretaps; 12 such approval has been required prior to the institution of microphone surveillances since 1965. 13 This requirement has often been ignored for wiretaps and bugs, 14 and it was not even applied to NSA’s electronic monitoring system and its program for “Watch Listing” American citizens. From the early 1960’s until 1973, NSA compiled a list of individuals and organizations, including more than one thousand American citizens and domestic groups, whose communications were segregated from the mass of communications intercepted by the Agency, transcribed, and frequently disseminated to other agencies for intelligence purposes. The Americans on the list, many of whom were active in the anti-war and civil rights movements, were placed there by the FBI, CIA, Secret Service, Defense Department, and the Bureau of Narcotics and Dangerous Drugs without judicial warrant, without prior approval by the Attorney General, and without a determination that they satisfied the executive branch standards for warrantless electronic surveillance. 15 For many years in fact, no Attorney General even knew of this project’s existence. 16
Electronic monitoring by the National Security Agency and the CIA, however, is outside the scope of this Report. This Report focuses exclusively on the FBI’s use of electronic surveillance; NSA’s monitoring system is described at length in the Committee’s Report on NSA. Because the legal issues and the FBI’s policy and practice regarding consensual monitoring devices such as “body recorders” are distinct from those of nonconsensual wiretaps and microphone installations, 17 the Report is also confined to the latter forms of electronic surveillance.
January 9, 2008
Private detectives and investigators assist individuals, businesses, and attorneys by finding and analyzing information. They connect small clues to solve mysteries or to uncover facts about legal, financial, or personal matters. Private detectives and investigators offer many services, including executive, corporate, and celebrity protection; pre-employment verification; and individual background profiles. Some investigate computer crimes, such as identity theft, harassing e-mails, and illegal downloading of copyrighted material. They also provide assistance in criminal and civil liability cases, insurance claims and fraud, child custody and protection cases, missing persons cases, and premarital screening. They are sometimes hired to investigate individuals to prove or disprove infidelity.
Private detectives and investigators have many methods to choose from when determining the facts in a case. Much of their work is done using a computer, recovering deleted e-mails and documents, for example. They may also perform computer database searches or work with someone who does. Computers allow investigators to quickly obtain huge amounts of information such as a subject’s prior arrests, convictions, and civil legal judgments; telephone numbers; motor vehicle registrations; association and club memberships; and even photographs.
Detectives and investigators also perform various other types of surveillance or searches. To verify facts, such as an individual’s income or place of employment, they may make phone calls or visit a subject’s workplace. In other cases, especially those involving missing persons and background checks, investigators interview people to gather as much information as possible about an individual. Sometimes investigators go undercover, pretending to be someone else to get information or to observe a subject inconspicuously.
Most detectives and investigators are trained to perform physical surveillance, which may be high-tech or low-tech. They may observe a site, such as the home of a subject, from an inconspicuous location or a vehicle. Using photographic and video cameras, binoculars, and cell phones, detectives often use surveillance to gather information on an individual; this can be quite time consuming.
The duties of private detectives and investigators depend on the needs of their clients. In cases that involve fraudulent workers’ compensation claims, for example, investigators may carry out long-term covert observation of a person suspected of fraud. If an investigator observes him or her performing an activity that contradicts injuries stated in a worker’s compensation claim, the investigator would take video or still photographs to document the activity and report it to the client.
Detectives and investigators must be mindful of the law when conducting investigations. They keep up with Federal, State, and local legislation, such as privacy laws and other legal issues affecting their work. The legality of certain methods may be unclear, and investigators and detectives must make judgment calls when deciding how to pursue a case. They must also know how to collect evidence properly so that they do not compromise its admissibility in court.
Private detectives and investigators often specialize. Those who focus on intellectual property theft, for example, investigate and document acts of piracy, help clients stop illegal activity, and provide intelligence for prosecution and civil action. Other investigators specialize in developing financial profiles and asset searches. Their reports reflect information gathered through interviews, investigation and surveillance, and research, including review of public documents.
Computer forensic investigators specialize in recovering, analyzing, and presenting data from computers for use in investigations or as evidence. They determine the details of intrusions into computer systems, recover data from encrypted or erased files, and recover e-mails and deleted passwords.
Legal investigators assist in preparing criminal defenses, locating witnesses, serving legal documents, interviewing police and prospective witnesses, and gathering and reviewing evidence. Legal investigators also may collect information on the parties to the litigation, take photographs, testify in court, and assemble evidence and reports for trials. They often work for law firms or lawyers.
Corporate investigators conduct internal and external investigations for corporations. In internal investigations, they may investigate drug use in the workplace, ensure that expense accounts are not abused, or determine whether employees are stealing merchandise or information. External investigations attempt to thwart criminal schemes from outside the corporation, such as fraudulent billing by a supplier.
Financial investigators may be hired to develop confidential financial profiles of individuals or companies that are prospective parties to large financial transactions. These investigators often are certified public accountants (CPAs) who work closely with investment bankers and other accountants. They might also search for assets in order to recover damages awarded by a court in fraud or theft cases.
Detectives who work for retail stores or hotels are responsible for controlling losses and protecting assets. Store detectives, also known as loss prevention agents, safeguard the assets of retail stores by apprehending anyone attempting to steal merchandise or destroy store property. They prevent theft by shoplifters, vendor representatives, delivery personnel and even store employees. Store detectives also conduct periodic inspections of stock areas, dressing rooms, and restrooms, and sometimes assist in opening and closing the store. They may prepare loss prevention and security reports for management and testify in court against people they apprehend. Hotel detectives protect guests of the establishment from theft of their belongings and preserve order in hotel restaurants and bars. They also may keep undesirable individuals, such as known thieves, off the premises.